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The Asia Macro Investigator
Fear, Expectations, Valuations and Market Bottoms
Investors remain fearful even as value is beginning to emerge — The latest fear
now is a China growth collapse. 2011 has been the year of fears, many of which have
not as yet materialized. Inflation in Asia is moderating, earnings haven’t fallen off a cliff,
the US hasn’t double dipped yet, Europe hasn’t imploded, but now the fear is China
will. Chinese stocks are pricing in negative earnings growth to perpetuity. From these
levels, markets have risen in nine out of ten cycles. Increasingly, thoughts need to turn
towards what to buy rather than sell.
Economic data have generally surprised on the upside — The Citi economic
surprise index has been rising not falling, even in the case of Europe. For Asia, the
data continue to indicate growth - see Korean or Taiwanese exports, or the China PMI.
Our leading indicator continues to show slight improvements and is above the 2008
lows. In the meantime, the equity market is priced for a 30-35% decline in earnings.
IBES is still at 10.9% for 2011. EPS revisions are now at 1 stdev below the mean. They
usually trough at 1.9 stdev during prior recessions.
China, HK, India, Japan, Singapore & Taiwan are the highest-return markets —
With a return to mean in three years, and all offer double digit total returns annually.
ASEAN does not, with Indonesia offering only negative returns. To beat HK, Indonesia
has to go to a P/BV of 2.6 stdev above mean. Among the cyclical sectors, real estate
and banks stand out, as does tech. The consumer sector would need to go to 3.3 stdev
to provide the same return as real estate. The latter only has to go back to mean.
Country and sector drivers — The second part of our Macro Investigator examines
each country and sector for each of the main drivers. These include earnings revisions,
valuations, and liquidity indicators.
We are most overweight Hong Kong, Korea and Taiwan — We are most
underweight Australia, India and Malaysia. By sector, we continue to like Banks,
Technology, Industrials and Real Estate, and prefer Energy over Materials."
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Asia Macro Investigator
Fear, Expectations, Valuations and Market Bottoms
Investors remain fearful even as value is beginning to emerge — The latest fear
now is a China growth collapse. 2011 has been the year of fears, many of which have
not as yet materialized. Inflation in Asia is moderating, earnings haven’t fallen off a cliff,
the US hasn’t double dipped yet, Europe hasn’t imploded, but now the fear is China
will. Chinese stocks are pricing in negative earnings growth to perpetuity. From these
levels, markets have risen in nine out of ten cycles. Increasingly, thoughts need to turn
towards what to buy rather than sell.
Economic data have generally surprised on the upside — The Citi economic
surprise index has been rising not falling, even in the case of Europe. For Asia, the
data continue to indicate growth - see Korean or Taiwanese exports, or the China PMI.
Our leading indicator continues to show slight improvements and is above the 2008
lows. In the meantime, the equity market is priced for a 30-35% decline in earnings.
IBES is still at 10.9% for 2011. EPS revisions are now at 1 stdev below the mean. They
usually trough at 1.9 stdev during prior recessions.
China, HK, India, Japan, Singapore & Taiwan are the highest-return markets —
With a return to mean in three years, and all offer double digit total returns annually.
ASEAN does not, with Indonesia offering only negative returns. To beat HK, Indonesia
has to go to a P/BV of 2.6 stdev above mean. Among the cyclical sectors, real estate
and banks stand out, as does tech. The consumer sector would need to go to 3.3 stdev
to provide the same return as real estate. The latter only has to go back to mean.
Country and sector drivers — The second part of our Macro Investigator examines
each country and sector for each of the main drivers. These include earnings revisions,
valuations, and liquidity indicators.
We are most overweight Hong Kong, Korea and Taiwan — We are most
underweight Australia, India and Malaysia. By sector, we continue to like Banks,
Technology, Industrials and Real Estate, and prefer Energy over Materials."
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